Who Benefits from Microfinance? The Impact Evaluation of Large Scale Programs in Bangladesh

This paper evaluates the impact of microfinance on household consumption using nationally representative cross section data from Bangladesh. The survey encompasses a wide variety of information at the household, village and organization levels. Overall results indicate that the effects of microloans are not robust across all groups of poor household borrowers. Findings include:

• Poorest of the poor participants are among those who benefit most;
• Impact estimates are lower for those households marginal to the participation decision;
• Effects of participation are stronger for male borrowers;
• Effect of microfinance on household consumption expenditure does not seem to be strong.

The study finds an inverse relationship between household land ownership and benefits from participation in microcredit. These findings indicate that the simple targeting mechanism of microfinance program in Bangladesh based on household land ownership is effective, and that the efficiency of the microfinance program can be enhanced by allocating credit to the poorest marginal landholding households, for which the impact is the greatest.